Service Is Our Business chapter 9

THE contract, express or implied, which ties a man to his job is one in which good faith must have the deepest significance. From the employer’s stand-point, the work done within his business is the commodity he offers to society. Faithful work is essential to the success of the business—faithful employees its greatest asset.

For the employee, this contract concerns the most precious of all commodities—his own life—which he invests in the organization that employs him. His past experience, present status, and future hopes arc all packaged in this fateful agreement. If he does not have confidence that he is “getting a square deal” in return for his outlay of energy and skill, he suffers a deep frustration that may be harmful to his efficiency.

The question of a person’s worth is not determined, of course, by the whim or benevolence of the employer. A cartoon pictures a bar of iron worth $5.oo. The same bar of iron made into horseshoes would be worth $10.50. Made into needles, it has a value of $3,285.01; and if turned into balance-springs for watches, it becomes worth $250,000.00. The value of any material is not determined so much by what is in it as by the service it performs.

So it is with people. Their economic value depends on what they produce. This, in turn, depends upon great many complicated considerations. Only under the most primitive conditions of production and barter might the worker hope to get the full value of his production. In the Middle Ages, the problem was already so complex that theologians argued endlessly over the just wage and the just price. Today, with machine production and the extreme specialization that separate the producer from the ultimate consumer, the problem of what is a just wage in any particular instance becomes practically insoluble.

The president of a Brazilian Rotary club, in an address on employee relations, expressed part of the dilemma as follows:

The principle is that it does not appear to be right to fix the same remuneration for good and bad elements alike, and to lose sight of the immediate aim of a salary which should correspond to the work produced. We admit that the minimum wage was a necessity to avoid abuses. But from there onward, the actual system of increasing wages under threats, or under impositions, including prosperous concerns with those of smaller resources, comes to be a crying inequality.

The difficulty of actually achieving a square deal with employees only increases the need for good faith in seeking one. An open and earnest effort to establish a fair scale of rewards is needed. But, in describing the efforts of some Rotarians, no claim is made that any one of them actually achieves a square deal or that a specific plan could be used in every business. They are reported, rather, as manifestations of good faith and sincere intention.

Each business has its own special problems and must cut its coat according to its cloth.

The modern sciences of aptitude-testing and job-analysis are useful in finding the relative worth of employees in the same business. Keeping square pegs out of round holes, and making sure that each task is valued correctly in terms of difficulty and experience does not determine, however, what wages should be paid. At best, human abilities are conserved with resulting benefit to all concerned.

A Swiss Rotarian was able to develop a simple plan for determining wages in a plant where there had been many complaints and jealousies among the workers. A basic wage was graduated according to the age and domestic responsibilities of the worker. To this was added a so-called active wage based on the degree of skill or experience required by the particular job. In addition, a productive wage was geared to output. Since each part of the plan was assessed on a common point system, the satisfaction of the workers arose from knowing exactly what was required to improve their position.

A rather similar point system is used by an American insurance company to decide the readiness of its employees for promotion. The following qualities are taken into consideration: teachability, supervisory responsibility, initiative, public relations, analytical ability, personal friendliness, monetary responsibility, application, volume of work, neatness and accuracy, thoroughness.

Each quality (teachability, for example) is assessed according to the following definitions, and the capacity for advancement emerges from the average score after all the qualities have been assessed.

Needs repeated instruction (unsatisfactory in present position)….. 1
Requires detailed instruction (decreasing efficiency)….. 2
Slightly below average (keep in present position)….. 3
Average (advance questionable)….. 4
Slightly above average (advance slowly)….. 5
Readily grasps new ideas (advance steadily)….. 6
Outstanding ability (advance rapidly)….. 7

An obvious weakness of this system is the variability of human capacities and the relative importance of particular qualities to any given job. The chief advantage, however, is in making such assessments known to the employee. In this way he may see where improvement is needed and be convinced of the good faith of his employer and that he is receiving a square deal. Many Rotarians take pride in the fact that their good faith with employees is so evident, and working conditions so satisfactory, that: no employee has ever been moved to ask for a raise.

It would be ideal if ambition could be directed always into constructive effort through the assurance that increased productivity would reflect automatically in the pay check. The National Industrial Conference Board (U.S.A.) offered a critical study of “measured day work.” A base rate of pay was established after a job had been valued in terms of complexity, skill, mental, and physical demands. This rate was then compared with prevailing rates for similar jobs in the same area. In addition, extra compensation ranging from 15 percent to 25 percent of the measured day rate was given for production, quality, versatility, and dependability. One result of this plan has been less spoilage, because the worker knows that each piece of scrap affects his rating. There is also an eagerness to develop short cuts in manufacturing, and closer relations with supervisors.

One disadvantage noted was that exceptionally fast workers are discouraged by the limited variation between normal and maximum rates. That weakness was overcome by a Rotarian who operates a factory with fifty employees. He made them virtual sub-contractors of the orders which came into the plant. The employer furnished the material and machines, and bore the overhead expense. The worker supplied his labor at a rate considered fair to him, to the company, and to the customer, From the moment this sub-contract was accepted, the worker became his own boss. The faster he worked, the more orders he could handle and the higher his wages would climb.

This scheme was profitable to the company because it permitted exact cost control, and the results in employee satisfaction were amazing. Not only did ambition lead to greatly increased earnings, but there was no need for pushing or for stop-watch holding and little need for inspection because a spoiled unit had to be done over on the employee’s own time.

There is ample evidence that thorough development of such plans is beneficial to all concerned. Another company with an incentive-pay plan reported an 80 per cent decrease in man-hours for the same volume of goods, a $5,000 annual wage for laboring men, lower prices to the customer, and dividends on a stable basis from year to year for the stockholders.

Business stability interests not only stockholders but everyone affected by the boom-and-bust cycle that has plagued world economy. Most affected of all is the employee who is laid off during slack times. One man so affected strode into the office of his Rotarian employer.

“You can’t do this to me!” he declared bluntly. “You can’t turn me out onto the street. You wouldn’t do that to a horse. You can’t do it to me”

The employer was embarrassed. “Can’t you go back to the job you came from?” he asked.

“No, I can’t” said the man. “I had just got a little business started when you sent a man to ask me to work for you. I didn’t know that you would just keep me a couple of months—just long enough to ruin my business—and then turn me out”

This caused the Rotarian to think hard. His business was of a seasonal nature, and such layoffs were quite common and customary. But were they fair to all concerned? By careful planning, he was able to reorganize his operations so that every employee -was hired at an annual wage. The key to his plan -was flexibility. New employees were assigned to an “extra gang” which fills in wherever there is a rush. Whole departments were organized as extra gangs. In this way, it was possible to keep his labor force busy and earning most of the year.

That this plan, coupled with an incentive system on a departmental basis and profit-sharing, is satisfactory to labor is evidenced by the recent renewal of a union contract which included a guaranteed annual wage for 2,080 hours each year. Actually this type of contract is being sought increasingly by trade-unions, and a U.S.A. government study indicates that introducing these features in most seasonal industries would not increase costs more than six per cent if coordinated with existing system of state unemployment compensation. While no panacea for insecurity, this study concluded, the annual wage does make a substantial contribution to the stabilization of purchasing power.

How purchasing power can be “stabilized” was described at a Christmas party in an American pottery plant where the owner, who had been on poor relief 14 years previously, distributed $705,000 to his 827 employees. Each of the 88 men and women who had been with the business ten years or more received a bonus of $3,500. This story-book rise to riches began when the employer with seven other relief clients came to live in an abandoned pottery building. “My road has not been an easy one’,’ remarked the employer to his party guests, “but no man could ask for one more pleasant. Many people would like to be a king, possess great riches, or live a life of ease, but I would not trade your friendship tor anything in the world.”

This story has a heart-warming sequel. More than a year later, a disastrous fire left half the pottery a charred and twisted ruin. Uninsured, the owner thought that he was ruined, but he had not counted on his friends. While the building still smoldered, hundreds of employees and townsfolk were at work feverishly clearing away the debris. Manufacturers of materials were promising quick delivery- To show that he could count on them, employees put $1,000 into a pot before the fire was out, and subsequently worked at a low hourly rate on the unfamiliar task of rebuilding. Within two months, the plant was restored and equipped for a greater volume of production. Once more the employer had an apt comment: “I’ve invested in human nature in this community and no man ever received greater profits than it goodwill.”

The theme of “you can’t take it with you” has often been a dominant note in profit-sharing, but the aim of giving employees a square deal and actually increasing profits through stimulating their keenness, inspires the more carefully thought-out plans. Whether as largess, as a demonstration of good faith, or as plain good business, the tangible participation of employees in the
success of capitalist enterprise is receiving widespread attention.

The Eastern Rotary Wheel reports a club meeting in Calcutta, India, where profit-sharing was seen as the cure for labor conflict, particularly in small concern where there is intimate contact between all sections. Under the New Zealand Company Act (1924 and 1933) a plan for “labor shares” designed by a Rotarian became legal. In this scheme of employee-partnership, control of the business as well as profits is assigned on the basis of personal service. Mountains of statistics were accumulated by a subcommittee of the U.S.A. Senate in its “Survey of Profit-Sharing” (1938) to demonstrate that profit-sharing had been practiced successfully by large impersonal corporations as well as by small firms.

The objections of labor to profit-sharing, on the grounds that it is an uncertain form of reward and hampers organization, can be overcome. This was demonstrated in the experiment of a Birmingham (England) Rotarian who had had a long experience in sharing his profits. Some skeptics told him: “Yes, men will behave all right while it pays them. If circumstances were such that by showing goodwill it would affect their pockets, there would be a different tale to tell” Also, he heard some trade-unionists say that a firm that has profits to share should pay them out directly in higher wages.

The Rotarian was so impressed by this last argument that he decided to present such a scheme to his employees—an end to profit-sharing and a general raise in wages. To his surprise, the general meeting of employees received the plan without enthusiasm. Everyone agreed that it was quite generous, but each man who spoke seemed to have the fear that it would spoil the good spirit that had existed hitherto. One remarked that they had ceased to think of their jobs merely in terms of what they were going to get out of them, and did not want to be deprived of their dignity as partners.

A business that distributes half of its net profits to employees and is now five times as profitable as in the old days when the owner kept all the profits for himself, found that it could accomplish this happy result only with the co-operation of the union. Membership in the union was made a prerequisite of sharing. Dividends were paid monthly according to the changing ratio of the sales value of production to labor costs, With the co-operation of the union in allowing workers to change jobs and to help each other, unit efficiency increased 54 per cent in the first year.

But what of the non-profit organization? Where there is no opportunity for profit-sharing, or similar employee incentives, can other means be found to provide the square deal for employees?

Rotarians need only to look to their central office in Evanston and to its branch offices to find the answer to this question. Rotary International is strictly a non-profit organization. Its revenue is from a fixed per-capita contribution of its member clubs. Its income increases only in proportion to the increase in the size of the organization—and such increase brings with it a corresponding increase in expenses. Here is found a staff, averaging some 200 persons, who can have no delusion that increased production will result automatically in increased revenue, which will, in turn, be reflected in
the pay envelope. They are not dealing with production units and follow no sales graphs or charts. They deal in intangibles. Their interest is in quality production rather than quantity.

Yet those Rotarians, who have worked closely with these men and women as members of the board of directors or of Rotary International committees, have never failed to marvel at the loyalty, the sincerity, and the esprit de corps of the staff.

Add to this the fact that the governing body of Rotary International undergoes an almost complete change of personnel annually and a complete change every two years and one wonders, therefore, what may be the secret of this spirit of co-operation between employer and employee. Frankly, there is no secret. It is merely an example of vocational service in action. Rotary International practices what it preaches. Rotary International provides for its employees pleasant working conditions and a healthful, friendly atmosphere in which to work.

Surely, the principles of vocational service are getting more than lip-service at the headquarters of Rotary International—and in the branches of that office. Rotarians are cordially invited to inspect these “plants” at the first opportunity.

In all these efforts that Rotarians and others are making to achieve a square deal with employees, the keynote is expansion, increased efficiency, and employee satisfaction. In the square deal, the employee plays his part, convinced and inspired by the good faith manifested by the employer. He begins to identify his interest with the firm and to share the vision of its possibilities. He comes to appreciate the role of capital in storing up profits for a rainy day and investing in new machinery to improve the productivity of labor.

When the first census of manufacturers in the U.S.A was taken 105 years ago, the average worker was putting in 69 hours a week and took home $4.74. The manufacturer had on the average $557 invested for each worker he employed. Today the employer has about $10,000 invested for each worker who puts in about half as many hours and draws nearly twenty times as man dollars. The importance of this form of profit-sharing will not be lost on the employee who appreciates
square deal, and he will seek to reciprocate by refraining from wildcat strikes, by meeting production standards, and by striving to attain the qualities of the faithful employee specified in the following statement:



A man for hard work and rapid promotion, a man who can find things to do without the help of a manager and three assistants.

A man who gets to work on time in the morning and does not imperil the lives of others in an effort to be the first out at night,

A man who is neat in appearance.

A man who does not sulk for an hour’s overtime in emergencies,

A man who listens carefully when he is spoken to and asks only enough questions to insure the accurate carrying out of instructions.

A man who looks you straight in the eye and tells you the truth every lime.

A man who does not pity himself for having to work.

APPLY ANYWHERE: The world is searching for such men.

Perhaps Winston Churchill was thinking of such men when he described his view of the square deal enlarged lo a national scale:

“Our aim is to build a property-owning democracy, both independent and interdependent. In this I include profit-sharing schemes in suitable industries and intimate consultation between employers and wage-earners. We seek as far as possible to make the status of the wage-earner that of a partner rather than an irresponsible employee.

“It is in the interest of the wage-earner to have many other alternatives open to him than service under one all-powerful employer called the State. We do not wish the people of this ancient island reduced to a mass of State-directed proletarians, thrown hither and thither, housed here and there, by an aristocracy of privileged officials or trade-union bosses. Our ideal is a consenting union of free, independent families, and homes.”

Perhaps the first step in realizing this ideal is for employers to subject their present arrangements in rewarding and advancing their employees to a careful scrutiny. They might ask themselves questions such as those suggested by a British Rotarian in writing on “Incentives”:

(1) Are the people in production sure of receiving justice from all grades of management?
(2) Have they a sense of security?
(3) Is effort made to keep them fit?
(4) Do the wages they receive insure the security of decent living?
(5) Are they convinced that they will be promoted if they have the ability?
(6) Is the paramount incentive, creative activity aroused?
(7) Do they feel the sense of dignity of man in the work they perform?
(8) Are they made to feel the sense of duty, to get the spirit of their responsibility and their duty to the community?
(9) Do they realize that the dignity of man means the application of inescapable duties?

Even though it may not be practical to redeal the cards immediately, it should be possible to remove the suspicion that whim or accident is a controlling factor. To establish confidence in his own good intentions is essential for any employer who hopes to inspire goodwill and earnest effort.

How do you plan to achieve a square deal with your employees?